At an estimated cost of S$1.33 billion, the new Sports Hub will boast a 55,000-seater retractable roof stadium, a 6,000-capacity Indoor Aquatic Centre, a 3,000-capacity Multi-Purpose Arena and a Water Sports Centre.

Despite the tender being awarded by the Singapore government in 2008, the PPP project commenced construction only in September 2010 – the result of delays from the 2008-2009 global financial crisis and high construction costs. It is now expected to complete in 2014.

Other major infrastructure projects soon to get underway include the Tuas desalination plant, Singapore’s second and largest such plant. Local water authority PUB closed its open tender late last year and the outcome of the tender is expected in first quarter 2011. The Tuas desalinated water plant is expected to complete by 2013.

This is already PUB’s fourth Design, Build, Own and Operate (DBOO) project. The first three were desalination and recycled water projects. The purpose of such arrangements include helping local water companies build their track records towards eventually exporting such expertise overseas.

Another notable launch is Tuas Power’s Tembusu Complex comprising a waste re-utilisation facility, a biomass-clean coal co-generation plant and a desalination plant, costing an estimated US$1.5 billion.

The project has already garnered several local awards for innovation and research with part of the biomass-clean coal cogeneration plant’s processes converting ash into synthetic aggregates for use in the construction industry.

FIDIC Red Book – A hiccup?

In a rare decision, the Singapore High Court in PT Perusahaan Gas Negara (“PGN”) v CRW Joint Operation (“CRW”) [2010] 4 SLR 672 refused to uphold an ICC arbitration award arising from a contract using the FIDIC Red Book 1999 Edition.

Disputes between the parties over variation orders and payment requests were referred to a Dispute Adjudication Board (DAB) by the contract. The parties accepted several of the DAB’s decisions, save one involving a disputed sum of over US$17 million.

The DAB decision was referred to arbitration and the Tribunal upheld it in its award. When CRW applied to register the arbitration award in a Singapore court, PGN sought to set it aside.

The Singapore High Court set aside the award on the basis that the arbitration tribunal exceeded its powers in rendering a final award in contravention of the parties’ agreement. The High Court interpreted the dispute resolution provisions in the FIDIC Red Book to mean that CRW was first required to refer the disputed DAB decision back to the DAB for review and confirmation, before involving arbitration.

Notably, the Court observed a possible gap in the 1999 FIDIC Red Book as it did not expressly allow a counter party’s failure to comply with a DAB decision to be referred directly to arbitration.

This is a rare instance of the Singapore High Court setting aside an arbitral award. It highlights the importance of parties understanding the clauses in their contract, especially how the reference to arbitration is to be properly invoked.

Mohan R Pillay
Partner & Joint Head of Office
Pinsent Masons MPillay LLP
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@pinsentmasons.com

The 2010 survey sees a much broadened territorial scope to include emerging venues such as Singapore together with the established venues of London, Paris, Switzerland and New York.

The key factors influencing international arbitration identified by the survey are not surprising – governing law, seat of arbitration, choice of arbitral institution, and appointment of an arbitrator.

A. Governing Law

The survey revealed a preference for a company’s home jurisdiction as the governing law.

When this was not possible, the next choice was for the widely accepted laws of England, New York, or Switzerland.

B. Seat of Arbitration

The survey identified a clear emphasis by corporates for arbitration seats to have “formal legal infrastructure”. This included the national arbitration law and a track record in enforcing arbitration agreements and arbitral awards.

Survey results on the preferred seat of arbitration reveal Singapore’s emergence as a regional leader in Asia. Singapore garnered 7% of votes in line with Paris (7%), Tokyo (7%) and New York (6%) but behind the historically well established centres of London (30%) and Geneva (9%).

The survey respondents were also asked to rate the arbitration seats which they had used before. Of these, London, Paris, New York were well regarded while Singapore was the next most commonly referred to seat.

47% of survey respondents rated Singapore as very good or excellent. This certainly reflects well on Singapore’s push in recent years to be a regional hub for arbitration. As the 2010 survey recognised, Singapore is a new entry from the 2006 survey as the most popular Asian seat.

C. Choice of Arbitral Institution

When choosing an arbitral institution, the survey showed that corporations look for neutrality, “internationalism” and a strong reputation. This was important as an institution with broad acceptance increased the likelihood that the counterparty would accept the institution.

This has important practical repercussions – as one survey respondent noted, such institutions would be readily accepted without having to trade-off some other element of the contract negotiation.

The emergence of Singapore as the choice of seat in Asia is also reflected in corporate perceptions of arbitral institutions. In the 2010 survey, the majority of votes for preferred arbitral institutions went to ICC (50%), LCIA (14%) and AAA/ICDR (8%) and SIAC (5%).

D. Singapore Efforts

The survey results are evidence of Singapore’s successful and well documented efforts at positioning itself as an international arbitration centre:

• Singapore offers an attractive “neutral” seat in Asia for impartial resolution of disputes

• As a signatory to the New York Convention, Singapore arbitration awards are enforceable in over 140 countries

• Singapore’s International Arbitration Act (which adopts the UNCITRAL Model Law regime,) was revised as recently as 1 January 2010 to remain current with developments in international arbitration;

• Singapore’s Courts have designated arbitration judges and are supportive of arbitration;

• Singapore’s laws allow foreign lawyers to conduct arbitration in Singapore (including those governed by Singapore Law)

• As reflected in the 2010 International Arbitration Survey, the SIAC is a leading regional arbitral institution. In 2009, the SIAC saw the highest increase in arbitration case-load (60%) among the major arbitral institutions in the world;

• Maxwell Chambers (launched in January 2010) offers parties state-of-the-art dispute resolution complex, with dedicated arbitration hearing rooms and related support facilities. It currently houses the SIAC and leading institutions such as the American Arbitration Association, the Permanent Court of Arbitration, the ICC, the Arbitration and Mediation Centre of the World Intellectual Property Organization and the International Centre for the Settlement of Investment Disputes

Mohan R Pillay
Partner & Joint Head of Office
Pinsent Masons MPillay LLP
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@pinsentmasons.com

It is natural, therefore, that parties in contract negotiations would rely on technology to find changes in the document being negotiated, particularly where proposing amendments and developing clauses.

In the past, we would rely on the other side to direct us to amended clauses in a contract or to relay the substance of the proposed or incorporated amendment. In some instances, we would have to read the document from top to bottom to identify each and every change.

Today, thanks to technology, we rely on ‘track changes’ or compare software which raises the question: “What is accepted practice now that we conveniently use track changes?”

Earlier this year, the Queensland Supreme Court considered two important question in the case Thiess Pty Ltd v FLSMIDTH Minerals Pty Limited [2010] QSC 6: (i) what is a lawyer’s duty when making changes to draft deeds; and (ii) when should the Court intervene to rectify a document.

The facts of the case

Queensland Aluminium Limited (QAL) had engaged Thiess Pty Ltd (Thiess) to design and construct three high temperature processing plants, known as calciners, at QAL’s operation in Gladstone. Thiess subcontracted a large part of the design work to FLSMIDTH.

In mid-2003, the calciners, built to FLSMIDTH’s design, were found to have structural problems and by the end of 2004 Thiess had commenced proceedings against FLSMIDTH to recover its overruns and lost bonuses under the head contract with QAL.

In early 2005, QAL, Thiess and FLSMIDTH began negotiations toward a settlement. After months of negotiations, the parties entered into a settlement deed (Main Deed). As part of these negotiations, Thiess and FLSMIDTH agreed to enter into a separate Side Deed that, amongst other things, dealt with the ongoing liability of Thiess and FLSMIDTH and, in particular, reserved Thiess’ rights and FLSMIDTH’s liability in relation to the proceedings on foot.

Initially, the Main Deed between QAL, Thiess and FLSMIDTH included a limitation clause that sought to limit FLSMIDTH’s liability to the limit of the indemnity under the Project Specific PI Policy in accordance with the Consultancy Agreement. The parties believed that this included the primary policy of insurance provided by QBE and the excess policy provided by Liberty.

FLSMIDTH’s solicitors moved the limitation clause from the Main Deed to the Side Deed and at the same time amended it in a material way.

When the amendment appeared in the next version of the Side Deed, the whole of the clause was marked up on the basis that it was a new clause in the Side Deed. The covering email sent by FLSMIDTH’s solicitors identified some of the changes to the document but not the material changes to the limitation clause.

Negotiations between FLSMIDTH and Thiess continued for another five weeks before the documents were finally executed.

After the execution of the deeds, Thiess claimed that the changes to the version of the limitation clause in the Main Deed were intentionally not identified and did not reflect their understanding of the commercial deal.

Thiess consequently commenced proceedings against FLSMIDTH seeking rectification of the Side Deed on the basis of common or alternatively unilateral mistake. Thiess also made submissions that FLSMIDTH’s solicitor’s failure to identify the changes to the Side Deed was intentionally deceptive and misleading.

What the court decided

The judge (His Honour McMurdo J) conducted a detailed examination of:

• all the dealings between the parties and, in particular, of their lawyers, the drafts and correspondence accompanying the amendments; and

• the evidence called by both sides regarding proper practice of solicitors in the process of drafting and redrafting of such documents.

According to the expert called by Thiess, a careful and competent solicitor of good repute would direct their opponent’s attention specifically to such a change within their previous draft of the clause.

On the view of the expert called by FLSMIDTH, that was not required, because a competent solicitor in receipt of such an email would not rely simply on the covering email. They would read its attachment, in this case the draft Side Deed, and it would be sufficient for them to mark the whole of the proposed clause 8, as FLSMIDTH’s solicitors did.

The judge held that the new limitation clause contained a markedly different commercial element to the overall settlement. In those circumstances, Thiess’ solicitor “could have expected” that the amending solicitor would have drawn attention to such a material change.

In addition, the judge found that the drafting of the new clause would have a result that was quite different from that which the parties and their solicitors had been discussing. While the judge excused the amendment to some extent, noting that it appeared that FLSMIDTH’s solicitors were not aware of the effect of the change made, the court acknowledged that it was the continued common intention of the parties that the deeds would not affect the proceedings that were on foot. The court ordered that the Side Deed reflect the initial intent of the parties.

Things to consider

It would seem that the judge in this case excused the masked amendment as misunderstanding of the legal effect. However, had the judge held the parties strictly to the words they had agreed to, the amount Thiess may have been able to recover under the first proceedings would have been significantly reduced.

So, even though ‘track changes’ is convenient, you should always check what you receive from the other side because it will not be an easy process to have an error rectified.

Moreover, lawyers should draw attention to any material change they make. Otherwise, they may fall foul of ethical standards if, unlike in the Thiess case, a judge forms the view they were well aware of the impact of a change and communicated the change in a way that it might go unnoticed by the other side.

The construction industry, like the food and beverage business, shows considerable partiality to foreign workers. The most common reason – lower labour costs. Thus, the construction industry is filled with foreign workers running the gamut from India, Sri Lanka, China, Thailand, Indonesia, Philippines and even Myanmar.

Things however look set to change with the 2010 budget announcement including a call to increase local productivity as foreign workers now comprise almost a third of the total workforce. This has led to government moves to reduce dependence on foreign workers by hikes in the foreign worker levy and reducing the “man-year” entitlement which directly restricts the number of foreign workers on a site.

This is clearly designed to encourage businesses to restructure and upgrade their operations through innovation and training of their local workers.

Productivity is expected to rise, but so are construction costs, possibly by as much as 6 per cent when these restrictions to foreign labour kick in next year.

Comparing the Singapore increase with construction costs in key Asian cities, prices are generally expected to rise with economic recovery and the increase in building needs. The Singapore Building and Construction Authority statistics for 2nd quarter 2010 showed standard high rise office building costs of US$1,910/m2 in Hong Kong, US$760/m2 in Beijing, US$832/m2 in Shanghai, US$1,835/m2 in Singapore.

In perspective, Beijing and Shanghai are some of the cheapest cities to build but prices for these cities could rise 3 per cent this year and Hong Kong could register the biggest percentage increase in costs.

Rising levels of construction (and construction costs) are likely to herald more rather than less disputes.

A recent conference organised by the Singapore International Arbitration Centre discussed the development of business in India and the availability of arbitration. The booming Indian economy, set to hit 8 per cent growth this year, has created tremendous business opportunities for investors. As Singapore’s law minister Mr K. Shanmugam who spoke at the conference noted, the best-laid investment plans can turn awry and more are increasingly looking at arbitration in lieu of court proceedings to settle disputes.

Singapore is already the top Indian destination for investments abroad by Indian companies between 2008 and 2009 and more than 4,000 Indian firms operate here today. Singapore’s attractiveness as an arbitration hub for Indian companies is also reflected in SIAC’s announcement that it handled arbitration cases from India involving $173 million for 2010 to date, up from disputes involving $156 million for the whole of 2009.

Investors in the major countries in the region seek a neutral venue for arbitration and Singapore presents a easily accessible, neutral and effective arbitration venue.

Having world class facilities helps as well as Singapore then becomes the ideal venue for firms that might need help if their investments hit trouble. As Sir Vivian Ramsey QC observed on Friday last week at the SIAC-SCL Conference on “Construction Disputes Asia” in Singapore, arbitration in Singapore has the support of the government as seen with the building of a “state-of-the-art” arbitration centre at Maxwell Chambers.

At the same time, India has recognised the need to institutionalise its arbitral process and is now seeking to revamp the Indian Arbitration and Conciliation Act. Generally, the proposed changes reflect a shift towards institutional arbitration in lieu of the prevalent practice of ad hoc arbitration in India.

These amendments also underline a determined effort to reduce the role of Courts by severely limiting the scope of the public policy exception.

One unusual and interesting proposal is the introduction of a deemed arbitration clause for commercial contracts worth 50 million rupees (about £7 million at today’s rates) or more unless the parties agree otherwise. In such cases where parties fail to refer the dispute to an approved arbitral institution, the Indian High Court is then empowered to authorize the appointment of an approved arbitral tribunal within 30 days of a reference made by a party.

The proposals are very much at an early stage in the form of a Consultation Paper. It will be interesting to see what progress it makes in the coming months.

Mohan R Pillay
Partner & Joint Head of Office
Pinsent Masons MPillay LLP
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@pinsentmasons.com

The answer may be as simple as alternative dispute resolution. Sensible commercial parties have always engaged in ADR and more and more jurisdictions around the world are promoting a culture where you can’t expect your day in court until you have tried to sort out your dispute yourself.

But can ADR really be forced on to potential litigants?

Although ADR has been promoted in different ways in different countries, the aim has always been the same – to reduce legal costs, increase efficiency, bring about a cultural change and free up limited court resources.

Each jurisdiction’s policies and procedures have had a common theme – to try to force parties to resolve their own disputes, including by:

• filing statements that outline what steps the parties have taken to resolve the dispute;
• limiting the circumstances in which a party can reject an invitation to mediate;
• requiring parties to disclose critical documents early; and
• ordering parties to participate in non-binding ADR.

Places like Hong Kong, the United Kingdom and, indeed, various Australian state courts have followed a ‘practice directions’ approach. Australia’s Federal Government, on the other hand, has decided to adopt a legislative option.

In response to key recommendations made by the National Alternative Dispute Resolution Advisory Council in its 2009 report The Resolve to Resolve , Australia’s Federal Government introduced the Civil Dispute Resolution Bill into the Parliament on 16 June 2010.

The Bill proposes that any applicant commencing proceedings in the Federal Court or Federal Magistrates Court in relation to a civil dispute (with some exceptions) and any respondents to those proceedings must file a ‘Genuine Steps Statement’.

The applicant’s Statement must include the steps taken to try to resolve the dispute, or why no steps have been taken. The respondent’s Statement must either agree with what applicant has stated, or disagree and provide reasons.

While the Bill does not explicitly define what constitutes a ‘genuine step’, it does set out a number of examples, including notifying the other party of the dispute, offering to discuss the dispute, providing information and documents, considering ADR and attending ADR.

Lawyers who do not advise their client of the requirement to file a Statement may have a costs order awarded against them.

Mandated ADR has been around for a long time, but it still hasn’t been universally adopted. There is always the argument that there will be no genuine change, no cultural shift, and that the parties will simply ‘go through the motions’ because the law says that they must. There is also the risk that costs will be ‘front-loaded’ rather than result in a genuine cost savings.

Australia’s Civil Dispute Resolution Bill has not been enacted yet, and given the current ‘hung’ Parliament we are facing, it may be some time before we know if legislation can be used effectively to address perceived inefficiencies in the civil justice system.

But then again, perhaps we will know sooner than we think, because the Australian state of Victoria is set to go down the legislated path. Its Civil Procedure Bill 2010 (Vic) is more prescriptive than Federal Government’s proposed Civil Dispute Resolution Bill and its pre-litigation requirements include, as a bare minimum, exchanging critical documents early and considering options for ADR.

The Victorian Bill also introduces a new ‘overarching purpose’ for Victorian Courts – to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’. Furthermore, new standards of conduct, called ‘overarching obligations’, aim to further the administration of justice in relation to civil proceedings.

In the end, so-called ‘pre-action protocols’ are just another step along the continuum of forcing parties to resolve disputes themselves. The real question is: can legislation and practice directions change the cultural behaviour of litigation, or are we barking up the wrong tree?

The revisions serve three basic purposes. First, they fill in a few holes that have become apparent over the years. Second, some provisions are added to expedite the arbitration process—like adding a requirement that the tribunal establish a “provisional timetable for the arbitration.” Finally, they update the original rules to account for changes in technology. This recap is from front to back, not in order of significance. Some of the most significant changes are noted at the end, so read on!

Notices and Other Communications

The 1976 Rules (Article 2) required notices to be physically delivered, while the 2010 Rules provide that notices and other communications “may be transmitted by any means of communication that provides or allows for a record of its transmission.” E-mails and facsimiles are subject to two special rules. First, the communication is deemed received only if sent to a person specifically designated for receiving such communications. Second, they are deemed received on the day sent, except for a notice of demand for arbitration, which is deemed received on the day it reaches the recipient’s electronic address. Accordingly, you may wish to add a line to your UNCITRAL arbitration clause to designate an individual for receipt of a notice of arbitration, in addition to designating the place and language of the arbitration.

While Article 3 setting out the requirements for a notice of arbitration did not change, a new provision was added clarifying that the constitution of the arbitral tribunal will not be hindered by any controversy about the sufficiency of the notice, and giving the tribunal jurisdiction over such controversies.

Response to the Notice of Arbitration

A response to the notice of arbitration was not previously required, and Article 19 simply required the respondent to provide a statement of defense by a date determined by the tribunal. Article 4 of the 2010 Rules now requires the respondent to respond within 30 days of receipt of the notice of arbitration, with the response to include the name and contact details of each respondent, and any response to the items in the notice regarding the arbitration agreement, the relevant contract, the claimant’s description of its claim and requested remedy, and proposal with respect to the number of arbitrators.

The response may also include any objections to jurisdiction, a brief description of any counterclaims, and a notice of arbitration with respect to other parties to the agreement (beyond claimant). As the language is permissive instead of mandatory, it appears that counterclaims or crossclaims are permitted but not compulsory.

The Appointing Authority

The 1976 Rules contemplate the parties designating an Appointing Authority to assist with the appointment of arbitrators and any challenges to arbitral appointments. The procedures for determining an Appointing Authority are consolidated in Article 6 of the 2010 Rules with a few modifications. The new rules reduce the amount of time one must wait before making a request that the Secretary-General of the Permanent Court of Arbitration at the Hague resolve disputes regarding the Appointing Authority — from 60 days to 30 days. Additionally, asking the PCA to act as the Appointing Authority is now expressly permitted.

The Number of Arbitrators

The 2010 Rules retain the default position of having three arbitrators if the parties fail to agree on use of a sole arbitrator. However, Article 7.2 now provides more flexibility by allowing the Appointing Authority to appoint a sole arbitrator if one of the parties asks for this, or either party fails to appoint a second arbitrator and using just one is “more appropriate” under the circumstances of the case.

Arbitrator Challenges

The 2010 Rules add two innovations. First, a new annex provides a model statement of independence to be provided by proposed arbitrators. Second, a schedule is added for resolving any challenges (the original rules had a deadline for raising a challenge but no timetable for resolution). Per the new Rules, if the appointing party does not agree to the challenge, or the challenged arbitrator does not withdraw, in either case within 15 days, then the challenging party has 30 days from the date of the challenge to pursue it with the Appointing Authority, and otherwise it is waived.

Arbitrator Liability

Article 16 of the new Rules adds a waiver of liability for the arbitrators “save for intentional wrongdoing.” This waiver also applies to the Appointing Authority and to experts appointed by the panel.

Joinder

Article 17.5 now permits the tribunal to allow other parties to the arbitration agreement to be joined, unless the third party would be prejudiced by joinder. This is a significant advance over the prior rules that were silent on the subject.

Arbitral Fees

The 2010 Rules attempt to address the problem of excessive fees by requiring that the fees be reasonable, requiring the arbitrators to explain how they have fixed the fees and costs, and allowing the parties to appeal the fees and costs to the Appointing Authority. Previously, the tribunal members set their own fees, and there was no real provision for oversight, since UNCITRAL arbitration is non-administered. This addresses one of the most common criticisms of non-administered arbitrations generally.

Andrew Ness
William DeVan

In this regard, the recent adoption on July 27, 2010 of Federal Laws 193-FZ and 194-FZ improving the legal regime of Mediation (the Mediation Laws) can be seen as a bold and satisfying legislative move to complete the legal framework of ADR in Russia and stimulate the use of these methods (the arbitration legal regime has indeed been settled for long already by Federal Laws of July 7, 1993 and July 24, 2002). These Mediation Laws will come into force on January 1, 2011.

Initiated several years ago by the Chamber of Commerce and Industry of the Russian Federation (CCIRF – http://www.tpprf-arb.ru/en/2010-01-13-20-37-26en/centerabouten) on the basis of the United Nations Commission on International Trade Law (UNCITRAL) 2002 model, the original mediation bill has been revamped earlier this year under the authority of the Russian President Dmitri Medvedev himself, bringing further enhancements (http://kluwerarbitrationblog.com/blog/2010/03/19/russian-president%E2%80%99s-bill-draft-law-on-mediation-%E2%80%93-is-a-new-epoch-of-adr-beginning-in-russia/comment-page-1/).

The most critical improvements of the Mediation Laws to the existing state of legislation are the following:

- anything said by a party during the mediation process cannot be used in litigation or arbitration at a later stage. This fundamental principle of mediation is now clearly provided for by the Mediation Laws;

- a framework for mediation proceedings is defined, with inter alia a tight maximum timeframe of 60 days for such proceedings (with certain exceptions);

- in order to insure their independence, neutrality and competence, the Mediation Laws provide for specific qualification requirements for mediators (whilst that kind of formal requirements does not exist yet in jurisdictions such as France). There are no provisions for licensing of mediators but they will have to get affiliated to self-regulated organizations (SROs) to be created.

In addition, the Mediation Laws consolidate the current state of legislation on a number of issues. Mediation can thus be initiated before or after a dispute has been submitted to a court or arbitral tribunal. Further, the settlement agreement reached as a result of the mediation can be confirmed by a court or arbitral tribunal, allowing compulsory execution orders. Failing such confirmation, the settlement agreement is considered as a simple civil contract.

Interestingly, ADR methods were imported to Russia earlier in the construction sector than in most other industries. Indeed, the growing involvement of international lenders in large construction projects has triggered the increasing use of international models of contracts such as FIDIC. Such models being structured to avoid disputes to a maximum largely rely on a panel of ADR methods encompassing mediation, dispute boards and arbitration. While dispute boards have rarely been set up in practice to date, independent experts have occasionally been called as mediators on specific construction projects, fulfilling to a certain extent the role of the Engineer under the FIDIC Books prior to 1995.

Although a clear legal framework is now set for mediation in Russia, there is still a strong need for additional factors and catalysers to make mediation become a common practice in Russian business culture, such as:

- a strong network of qualified mediators to allow successful mediation to take place. It is worth noting that many experienced professionals are already present in the Russian construction sector;

- a lobbying from institutions such as the CCIRF to promote mediation in Russia through a proven track record of successful precedents and statistics demonstrating that mediation brings tremendous added value to dispute resolution, such as rapidity, cost effectiveness, and last but not least a chance to pursue business relations – an attractive point for contractors when employers constitute a scarce commodity as in the current context.

It will be therefore interesting to follow the development of mediation in Russia in the next few years. And as the saying goes, an ideal situation in the field of dispute resolution will be achieved only when litigation itself will be considered as an alternative to mediation. Not necessarily a happy perspective for litigation lawyers – but this is still far from sight in Russia!

This judgment from the Inner House of the Scottish Court of Session is therefore very useful as an indication of the UK Courts’ current approach to causation of delay and extensions of time. Of course, this may not be the end of the story as City Inn still has the chance to lodge an appeal to the Supreme Court.

Key Elements

The dispute centred on a late-running project to build a hotel in the city of Bristol. Shepherd was employed by City Inn to carry out this project under an amended version of the 1980 edition JCT contract (a UK standard form of building contract with Quantities). The adjudications which followed the late finish resulted in Shepherd being awarded a 9 week extension of time (“EoT“) made up of 4 weeks awarded by the Architect and a further 5 weeks from the Adjudicator. City Inn was unhappy with this result and took the matter to the Outer House of the Scottish Court of Session. They applied for various orders including
a declaration that Shepherd were not entitled to an EoT; a reduction of the Architect’s award of 4 weeks EoT; and an order for payment of outstanding liquidated damages for delay.

Shepherd counterclaimed for a further 2 weeks EoT and for consequent loss and expense. The matter eventually proceeded to trial and was heard by Lord Drummond Young.

The main elements of the case were a bespoke clause covering entitlement to an EoT (clause 13.8), and the cause of the delay, taking into account the multiple delaying factors which occurred and the extent of their impact.

On the first issue, Lord Drummond Young found that clause 13.8 could not logically apply to instructions which caused delay just because they were in themselves late. Lord Drummond Young also noted that City Inn had not referred to their clause 13.8 rights until this juncture, and that neither of the parties appeared to take the clause into account when acting.

On the second – and more interesting – issue, causation and delay, Lord Drummond referred back to another contract clause (clause 25) to give his judgement. He said that under clause 25 the architect was to exercise his judgment and fix a “fair and reasonable” completion date. He held that an apportionment exercise may be necessary where there is concurrency or no dominant event.

The parties had been unable to locate an electronic, logic linked version of the original programme and so had to use a basic programme showing the activities and durations of the project. Lord Drummond rejected City Inn’s expert evidence which tried to establish, retrospectively, a critical path which led to the conclusion that Shepherd was not entitled to any EoT at all. Instead, he favoured Shepherd’s expert who said that he had attempted to establish a critical path, but that it was impossible to do so accurately. Lord Drummond preferred this common sense approach and found that, using this analysis, Shepherd was entitled to 9 weeks EoT.

City Inn appealed unsuccessfully with most of the judgment concurring with Lord Drummond’s reasoning. The majority opinion was set out by Lord Osborne, and contains five principles relating to the evaluation of a delay and loss plus expense claim. Of course, the Court was examining these issues under clause 25 of the JCT form. However, I think these general principles would have relevance to most construction contracts and illustrate the likely approach that would be adopted by the UK Courts:

1. For an EoT claim to succeed the relevant event must be shown to be likely to cause delay or have caused delay.

2. Whether or not a relevant event causes delay is a matter for common sense.

3. It is for the decision maker to decide what evidence to use in forming his conclusion. This may or may not include a critical path analysis. What matters is that the evidence used is sound, whatever form it takes.

4. If there is one dominant cause, all other causes will be disregarded. The dominant cause must be a relevant event for a claim to succeed.

5. It is for the decision-maker to apportion the delay to completion of works in a “fair and reasonable way” where there are two (or more) causes of delay, but only one of which is a relevant event and neither is dominant.

Although Lord Calloway dissented from the ‘apportionment’ reasoning, all three judges concurred in the result and on the critical path analysis being relevant but not necessary to decide the outcome of an EoT claim.

Implications for future cases

I should have of course stressed that this was a Scottish Judgment. What this means is that the decision is binding on the lower courts of Scotland but not so on the English courts – although given that it is an appeal court decision it will at least be persuasive in England.

What is most striking is that all the judges leaned heavily towards the arguments for being guided by principles of fairness, reasonableness and common sense. Many of the arguments put forward centred on the true meaning and consequences of events being concurrent. However, Lord Osborne stated that the important question was not whether events were truly concurrent, but rather the effects on the completion date of the events. In a similar spirit, Lord Carloway talks about the Architect applying “professional judgment” and “using his and not a lawyer’s common sense“.

In terms of implications for future cases in the UK, the judgment must not be considered an approval of the use only of common sense and fairness at the expense of a critical path analysis. In this case the critical path analysis presented was not considered sound and so was not used to form the judgement. However, that is not to say it may never be used to determine EoT claims, but rather it is up to the decision-maker as to whether he uses the critical path analysis in his “fair and reasonable” decision-making process.

And what of its implications further afield – in the international arena? I think the judgment and the arguments employed would be useful to anyone involved in disputes on causation and EoT’s where there are concurrent events and particularly where there is no critical path analysis or such evidence is flawed.

FIDIC talks about the Engineer making a “fair determination” whenever required to determine any matter under the Contract [Sub-Clause 3.5] and the provision dealing with extensions of time [Sub-Clause 8.4] refers to an extension of time “if and to the extent that completion……..is or will be delayed by any of the [specified] causes“. So the same arguments about causation, apportionment and concurrency could run under a FIDIC based contract.

Similarly, the NEC construction form NEC3, which treats delay events as “Compensation Events”, requires the Project Manager (who has to act “as stated in this contract and in a spirit of mutual trust and co-operation”) to assess “the length of time that, due to the compensation event, planned Completion is later than planned Completion” [Core Clause 63.3]. Interestingly, in NEC, assessment of the impact of the event includes “risk allowances for cost and time for matters which have a significant chance of occurring and are at the Contractor’s risk under this Contract” [Core Clause 63.6].

And, of course, I cannot sign off without mentioning that Pinsent Masons acted for Shepherd Construction on this case!

After finishing the project 467 days late, Maropakis had sent letters asking for a time extension but failed to turn them into a formal, certified claim. Maropakis then brought a claim against the Navy for the unpaid contract balance, which the Navy had withheld as partial payment for claimed LDs. The Navy counterclaimed for the full 467 days of LDs. The court granted summary judgment on the Navy’s counterclaim, on the basis that since Maropakis had never formally sought (in the form of a certified claim) a time extension, the court had no jurisdiction to consider such a claim in defense of the LD assessment. The trial court agreed, as did the Federal Circuit on appeal.

The Federal Circuit’s ruling on appeal was as follows: “we hold that a contractor . . . must meet the jurisdictional requirements and procedural prerequisites of the CDA [Contract Disputes Act-the U.S. law that requires claims to be certified before they can be litigated], whether asserting the claim against the government as an affirmative claim or as a defense to a government action.” The Court saw no reason to distinguish between affirmative claims and matters of defense to government claims in applying the requirement for a certified claim prior to litigation, at least when the defense would involve an adjustment to the contract terms, as in the case of a time extension.

The dissenting opinion argued in vain that there is a clear distinction between presenting an affirmative claim for relief, where claim certification is required, and simply defending against a government claim, where no affirmative relief is sought.

The simple lesson of Maropakis is that whenever completing a U.S. government contract late, it is vital to submit a formal claim for a time extension so as to preserve your right to dispute a possible LD assessment (which may not come for several years). There are also two broader concerns. First, this is another brick in the wall of recent decisions by the Federal Circuit hostile to the position of Contractors. Contractors should be learning that they are not dealing with a tribunal at all inclined to give them the benefit of the doubt. Second, developments in the law relating to U.S. government contracts frequently spread to the U.S. private sector. Where private contracts require some sort of formalities associated with asserting a claim, the Owner may raise similar arguments, seeking to bar any ability to dispute its later assessment of LDs when the claim formalities were not followed to seek a time extension.

Andrew Ness
Christian Henel

This third edition replaces the SIAC Rules 2007 and is part of SIAC’s efforts to stay lean and effective as it keeps apace with the rapid growth of international arbitration.

Key updates include an expedited arbitration procedure for claim amounts less than S$5 m or in cases of exceptional urgency. The expedited process requires an award to be issued within six months from the tribunal being constituted and the reasons for the award may be in “summary form” under the expedited procedure.

Also new to the Rules are the inclusion of a new rule on interim and emergency relief through an Emergency Arbitrator prior to the constitution of tribunal.

The Rules also establish an SIAC committee to decide on jurisdictional challenges to the arbitrator when the other party does not agree to a challenge to the arbitrator and the arbitrator being challenged does not withdraw voluntarily within 7 days of notice of challenge.

Added teeth have been added to provide additional protection of confidentiality as the tribunal may impose sanctions for breach of confidentiality obligations.

A key change to the 2007 Rules was the introduction of a Memorandum of Issues to be drawn up between the parties. This has now been removed in the new 2010 Rules.

With the growing popularity of international arbitration as a dispute resolution option, the robustness and flexibility of the amended SIAC Rules have offered a timely change when choosing SIAC as the administrating body for arbitration in Singapore.

The “greening” of equatorial Singapore sounds a bit odd until you realise that it refers to the Garden City’s buildings. Singapore has emerged as one of the more aggressive governments within the Asia-Pacific region in its pursuit of a green building program.

The Building Construction Authority (BCA) Green Mark certification scheme introduced in 2005 allowed developers till 2008 for the mandatory Green Mark scoring as part of Building Plan submissions and applications for Temporary Occupation Permits.

The certification comes with financial incentives as the BCA awards higher Gross Floor Area values for higher-tier Green Mark ratings.

Amongst the checklist items are efficient design for natural ventilation and lighting. Interestingly, points are also given for adjusting mechanical ventilation requirements in car-parks vis a vis CO sensors.

Heat transmitted from the roof is taken into account. Aesthetically, this has not been a bad thing with the creative use of roof gardens by developers. Even water efficiency toes the “green” line with rainwater diverted to landscape irrigation and bonus points given for using renewable energy from solar power or wind.

It’s been a testament to the BCA’s efforts that by May 2010, there are now 450 green buildings in Singapore with a total floor area of 16 million square meters or 8 percent of Singapore’s Gross Floor Area.

Other initiatives include a CleanTech Park (CTP) to be developed from July this year. The “green” themed business Park is expected to complete in 2030 with 20,000 people in 30 “living laboratory” buildings. These include “clean-tech” companies to commercialise green urban solutions for Singapore and the Asia-Pacific, along the same lines as Masdar City in the UAE.

The legal services landscape in Singapore is changing as well with the introduction of a new Joint Law Venture on the scene in the form of Pinsent Masons MPillay LLP, granted a JLV license in July this year by the Attorney-General’s Chambers.

Thomas Edison once said “Everything comes to him who hustles while he waits” – It’s an apt description of the association between Pinsent Masons and MPillay as the two entities patiently operated closely with each other for three years, by way of a formal association, from 2007 before obtaining their JLV license.

The pairing of the two entities through the JLV will allow a full range of service offerings as a “one-stop shop” option for clients, combining Pinsent Masons’ widely acknowledged international expertise with MPillay’s award winning in-depth local knowledge and experience.

As the sixth JLV in Singapore, it won’t be the first JLV but it will certainly be unique in its dedicated focus on the construction, engineering and energy sectors.

So some interesting and I believe positive developments for the Singapore legal environment in signing off this “Lean Green Venture” story.

Mohan R Pillay
Managing Partner, MPillay
Chartered Arbitrator
Adj. Assoc. Prof., Faculty of Law, Nat. Univ. of Singapore
Visiting Professor, Centre of Construction Law, King’s College London
16 Collyer Quay #22-02
Singapore 049318
E: mohan.pillay@mpillay.com